Restrictive covenants – Section 84(1) of Law of Property Act 1925 – Discharge – Claimant applying to discharge restriction binding leasehold interest in flat – Whether covenant prohibiting registration of transfer without consent of covenantee being “restriction … as to the user” of land – Whether Upper Tribunal having jurisdiction to discharge such restriction – Application dismissed
Since 2013, the claimant had owned a flat at No 1 Acacia Grove, New Malden, Surrey under a 999-year lease granted on 23 March 1960. It was one of four flats in a two-storey block, on first floor, directly above No 3 Acacia Grove. In 1983, the respective owners of Nos 1 and 3 entered into a deed of covenant which had subsequently been lost.
The 1983 deed was discharged by a deed of release and substitution made between the same parties and the intending purchaser of No 1 in 1988. By that deed, the purchaser of No 1 and the then owner of No 3 (the lower lessee) covenanted to observe and perform the covenants in the 1983 deed. As those covenants were not recited in the 1988 deed, its effect remained unknown.
A restriction was entered on the title of No 1 that: “Except under an order of the registrar no transfer or lease is to be registered without the consent of the lower lessee or other the registered proprietor for the time being” of the property.
On 24 November 2022, the claimant applied to the Upper Tribunal (UT) under section 84(1) of Law of Property Act 1925 for the discharge of the restriction. Section 84(1) gave the UT power to discharge or modify “restrictions … as to the user” of land. The power to modify or release restrictions affecting freehold land was extended by section 84(12) to leasehold covenants where the land was subject to a term of forty years or more, of which more than twenty-five years had expired.
An issue arose whether a restriction limiting the circumstances in which a transfer might be registered was within that power; and whether a covenant prohibiting registration of transfer without consent of covenantee was a “restriction … as to the user” of land. The application was determined on written representations.
Held: The application was dismissed.
(1) There was no doubt that the UT could not discharge a positive covenant, one requiring the covenantor to do something. But the restriction in this case was not of that kind. It was entirely negative in form and effect. It prevented the doing of something, namely, registration of a transfer or a lease without the consent of the owner of No 3. The short question in this case was whether such a restriction was a restriction “as to the user” of land. If it was, the UT would have jurisdiction to discharge the restriction on being satisfied of one of the statutory grounds. If it was not, the UT would have no power to assist the claimant whether it would like to or not: Re Blyth Corporation’s Application (1962) 14 P&CR 56 and Westminster City Council v Duke of Westminster [1991] 4 All ER 136 considered.
(2) Section 84(1) allowed the modification or discharge of a restriction affecting land where the restriction was “as to the user thereof or the building thereon”. The section as a whole was concerned with what might lawfully be done on land, and in that context both “user thereof” and “building thereon” appeared to be intended to refer directly to the activity being conducted on the land and for which it was being used.
The restriction here was clearly not a restriction “as to the user” of No 1 Acacia Grove. It was concerned only with the completion of a disposition by registration in the register of title. It did not impinge, directly or indirectly, on what the flat might lawfully be used for. The UT was not persuaded that the effect of such a restriction in limiting who might become the registered proprietor of the flat was relevant or that any possible practical impact which such a limitation might have on the use which might be made of the flat was sufficient to bring the restriction within the UT’s power. Even if, in practice, the effect of the restriction was that the flat could not be sold and was left unoccupied for a time, that would not demonstrate that the restriction itself was a restriction on the use of the land: Re Milius’s Application (1995) 70 P&CR 427 and Shephard v Turner [2006] 2 EGLR 73 considered. Therefore, the application had to be dismissed.
Per curiam: The claimant’s advisers appeared to have taken an excessively pessimistic view of the meaning and legal effect of the restriction which might have caused them to knock on the wrong judicial door in search of relief. In the claimant’s statement of case, it was asserted that the restriction gave the owners of No 3 “a wholly unfettered ability to refuse consent” to a request to allow a disposition to be registered. That seemed to be a surprising construction of the covenant. The purpose of the restriction was probably to shore up the mutual covenants in the 1988 deed (some perhaps positive in nature) by preventing a transfer of title and so providing an opportunity for a replacement deed to be entered into by the proposed transferee. In that context, a refusal of consent which was unrelated to that purpose might well be thought to be outside the intention of the covenanting parties. Where a contract conferred a discretion on one party (such as to refuse consent for something the other party wanted to do) and the exercise of that discretion might adversely affect the interests of the other party, it would usually be implied that the discretion had to be exercised honestly and rationally and for the purpose for which it was conferred: see Lewison: The Interpretation of Contracts, at paragraph 14.11). It would be odd for the restriction in this case to be interpreted differently.
Eileen O’Grady, barrister
